2000 Bravada Bad MPGS and Wheel binding

I have been having the same front wheel binding issue with my Bravada as well as having VERY poor MPGs. The first thing I did was check the transfer case fluid, and it already had the correct blue stuff, but I changed it just to be safe. It helped a little with the wheel binding, but not much and did nothing for my mpgs. So today, I pulled the encoder motor off to see if it was sticking. It was so corroded, that the housing was rotted through and the gears were all full of junk. So i assumed that it has been stuck in all wheel drive. I drove it with the front drive shaft removed, it feels soo much more peppy, but did nothing for the mpgs. im going to pick up a new encoder motor on monday and hope for the best. any ideas on why im only getting 11 mpg when i know i should be getting closer to 18. There is only one idiot light on it it is for all wheel drive (since the encoder mootor is missing). there are no codes stored either. it seems to run a bit rough on the highway for the first 10 minutes after I start it up, but is fine for the rest of the day. It is all stock, it has new plugs, & wires. any help would be great.

Is the transmission shifting into Overdrive? What is the engine rpm at 70mph?

Yes it is shifting into overdrive and I was traveling @ 65 Mph. Someone else told me to check the ECT sensor: that if it was telling the computer the engine is the wrong temp, it could give me that skipping feeling until it reaches running temp of 192. But wouldn't doesnt explain why I'm only getting 11 mpg with the all wheel drive disconnected. My buddy has a 2000 Blazer and gets close to 400 miles out of a tank of gas, I'm only getting like 250. I know with all wheel drive I won't have as good MPG as the 4 wheel drive switchable models, but this is crazy.:runaround:

Does the Check Engine light come on when you 1st turn the keyswitch on then go off when the engine starts?

No, the check engine light does not come on when I first start it up Most other lights come on and then shut off, but not the check engine.

Maybe the Check Engine bulb is burned out.
You might find a chain type auto parts store that gives free OBDII scans and see if there's any codes stored.

I have a Actron CP9180 Auto Scanner Plus OBD 2 II reader and have checked. there are no codes.

A friend has a 2000 Blazer that had poor fuel mileage but also had a TPS code and it wouldn't shift into Overdrive. After changing it out, his mileage went back to normal and the trans shifted corrrectly.
If your Actron can read current running conditions while the engine is running, see if the ignition timing changes. You should see it get up to 19-21 deg. BTDC then suddenly drop to around 15 deg.BTDC then start climbing back up. This tells you the knock sensor is working and the computer is trying to keep the ignition timing as advanced as much as possible.